[amp_mcq option1=”R + W + F + D – C” option2=”R + W + F + D + C” option3=”R + W – F + D – C” option4=”R + W + F – D – C” correct=”option1″]<\/p>\n
The correct answer is: A. R + W + F + D – C<\/p>\n
The operating cycle is the length of time it takes a company to convert its raw materials into finished goods, sell those goods, and collect the cash from the sale. It is calculated as follows:<\/p>\n
Operating cycle = Raw material storage period + Work in progress holding period + Finished goods storage period + Receivables (debtors) collection period – Credit period allowed by suppliers (creditors)<\/p>\n
Option A is the only option that includes all of these terms. Option B does not include the credit period allowed by suppliers, which is a necessary component of the operating cycle. Option C does not include the finished goods storage period, which is also a necessary component of the operating cycle. Option D does not include the receivables (debtors) collection period, which is also a necessary component of the operating cycle.<\/p>\n
The operating cycle is an important measure of a company’s efficiency. A shorter operating cycle indicates that a company is able to convert its raw materials into finished goods and sell them more quickly, which can lead to higher profits. A longer operating cycle indicates that a company is not as efficient in its operations, which can lead to lower profits.<\/p>\n","protected":false},"excerpt":{"rendered":"
[amp_mcq option1=”R + W + F + D – C” option2=”R + W + F + D + C” option3=”R + W – F + D – C” option4=”R + W + F – D – C” correct=”option1″]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[700],"tags":[],"class_list":["post-33702","post","type-post","status-publish","format-standard","hentry","category-business-finance","no-featured-image-padding"],"yoast_head":"\n